LIC IPO gets fully subscribed on Day 2
Swaraj Singh Dhanjal
MUMBAI: The initial public offering of Life Insurance Corp. of India got fully subscribed on the second day of the share sale, as the attractive pricing and discounts to policyholders and retail investors boosted demand.
On Wednesday, the first day of the share sale, investors bid for 67% of the shares on offer. The LIC share sale is on till May 9, longer than other IPOS, which remain open for three days. Subscriptions will also be open on Saturday. LIC will list on the stock exchanges on May 17.
The price band for the share sale has been fixed at ₹902-949 apiece. Retail investors and LIC employees get a discount of ₹45 per share, while policyholders get a discount of ₹60 per share.
To be sure, while the IPO has been subscribed 100% on the back of policyholder and retail categories, it needs to achieve a minimum subscription of 90% in the institutional investor category to close successfully.
The portion of the share sale reserved for institutional investors was subscribed 40% on the second day of bidding. The policyholders’ portion saw the most demand, getting subscriptions for three times the number of shares on offer. The retail investor portion was subscribed 93%, while the shares reserved for high net-worth individuals was subscribed 45%, data from the stock exchanges showed.
At the upper end of the price band, the stock would trade at around 1.1X market cap/embedded value (H1 FY22 embedded value) as against the industry average of around 3X, analysts at Axis Securities said in a note to clients.
“Given the under-penetration of life insurance in India, the higher protection gap, and the improving financialization of savings, we expect LIC to maintain its market leadership position adequately supported by good business traction. Furthermore, LIC intends to increase its share of high-margin non-par products to improve its margins which will augur well for the company over the long term. Additionally, the company’s NBP/APE (new business premium/ annual premium equivalent) growth has seen a strong rebound, enabling it to gain market share in Q4FY22,” the report added.
The government is offloading a 3.5% stake in the share sale for a total of ₹21,000 crore. Earlier on Monday, LIC raised ₹5,627 crore by selling shares to so-called anchor investors.
The strong demand from policyholders and retail investors is in line with the trend witnessed in the anchor subscription, where domestic institutional investors came out in strong support of LIC.